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By Ann C. Logue, MutualsAdvisor.com |
AACNX | Sep 22, 2008 |
You still here? After a week like we just had? If the markets didn’t take years off of your life, you might be thinking about all of the advantages you’ll gain someday from AARP membership. One of AARP’s many offerings is the AARP Mutual Funds, although you don’t have to belong to the organization to invest in the fund.
The AARP Conservative Fund (AACNX) is part of the second iteration of AARP mutual funds. In 1985, AARP licensed its name to Scudder, a no-load mutual fund company that was involved in a series of mergers and is now part of DWS Investments, owned by Deutsche Bank. In 2006, the old Scudder AARP funds were merged into DWS funds. AARP announced a new mutual fund program, operated by a for-profit subsidiary of the group and managed by SSgA, formerly known as State Street Global Advisors. The new AARP funds are allocated among different index funds. The Conservative Fund, for example, is invested 25% in U.S. government bonds, tied to the Lehman Brothers Aggregate Bond Index (at least, that was still the index’s name at press time); 20% in U.S. stocks, based on the Morgan Stanley Capital International U.S. Investable Market 2500 Index of 2500 large stocks; and 5% in international stocks, based on the Morgan Stanley Capital International Europe, Australasia and Far East Index (also known as EAFE). The other funds in the collection are also allocated among these index funds, but in different proportions.
This allocation makes sense for someone in late retirement who needs regular income but wants to have some capital appreciation as a hedge against inflation. It’s probably too conservative for younger AARP members or those below the magic 50th birthday membership requirement. The minimum investment is just $100, with no load. The fund has a low management fee, 0.01%, although it also pays 0.25% in management fees on the underlying funds. Then, there’s a 0.20% 12b-1 fee. This fund is still very small, with just $17.78 million in assets, so its expenses clock in at a whopping 2.20% of assets. AARP then waives fees equal to 2.16% of assets, for a total expense ratio of 0.50%.
In this messy year, the fund has lived up to its objective of income and capital preservation, although it hasn’t made money. It’s down 1.6% for the year to date, but in 2008, being down just a little bit makes a fund manager the heir to Warren Buffett. All the AARP funds are too new to be rated by Morningstar, but the Conservative Fund is beating the average performance of -4.8% for the category for the year to date as well as the performance last year, in which the fund was up 6.8% and the category as a whole was up 4.5%. In the meantime, the fund carries a yield of 3.96%. It makes retirement something to look forward to in these miserable times.
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